Peer Review: State of the Channel & 2015 Predictions4 Dec, 2014 By: Sand Sinclair, Editor
Each year, imageSource collects a mindshare of viewpoints from experienced office technology leaders who “take the pulse” of the industry and share their insight on what is working; what isn’t; what is trending on the horizon. As economic indicators report growth in some markets, we see disruption in others, as the channel continues to adapt and transform. Sharing their perspective on 4 key questions, leading vendors, OEMs, dealers and solution providers include: Toni Clayton-Hine, Vice President, Channel Partner Operations, Xerox; Thomas Schneck, President, DocuWare; Michael George, CEO, Continuum; Jeff Boate, President, PERRY proTECH; Larry White, Vice President of Sales, Toshiba America Business Solutions; Dave Sobel, Director of Partner Community, MAXfocus; and Andy Smalley, Director of Marketing, FlexPrint.
imageSource: What components have been critical for success among office dealers and solution providers as the industry keeps evolving?
Toni Clayton-Hine, VP, Channel Partner Operations, Xerox: A consistent focus on customer satisfaction is a critical component for success in this ever-evolving industry. Most dealers rely on their customer base for continued revenue and profitability. Smart Dealers work hard to cement customer relationships and don’t take their current cu s for granted. Those who devote time to understand and address their customers’ challenges gain valuable insight that enables them to expand their footprint in existing accounts with valued added services such as mobile printing, remote access, personalized workflow applications, and advanced security protection. Quarterly business reviews can help to identify business needs as customers’ priorities change and workflow requirements evolve. Customer service is a true differentiator. How a dealer handles everything from new product installations to routine maintenance is a key driver for customer satisfaction. Dealers who become trusted advisors can deploy technology to help reduce client costs and streamline processes, all while expanding their share of wallet and improving customer loyalty.
Thomas Schneck, President, DocuWare: We have seen that the most successful dealers are led by owners and management who are willing to invest in the future – mainly by hiring new people who have experience in new, evolving solution offerings and by training the existing staff to participate in these offerings as well. In addition, we see that the most advanced companies are putting in a lot of effort in re-branding their dealership – to be seen not any longer just as a copier company but rather as innovative solution vendor. They accomplish this goal by events such as open houses or Lunch & Learns or through digital marketing campaigns such as email marketing and social media. The last, and not at all the least success factor, is compensation. All these efforts mentioned above are in vain if the compensation plan does not drive the behavior of their sales and solutions team to move towards selling more advanced solutions.
Michael George, CEO, Continuum: The first component is the willingness to make the leap to selling managed IT services and offering a serious and credible IT solutions offering for their customer-base. Continuum has been helping OE dealers to make the transition easier with a first of its kind, revolutionary business model, “Managed IT Services Business Model Report,” co-authored by Continuum and Growth Achievement Partners (GAP), which is allowing dealers to achieve over 60% pre-labor gross margins with managed IT services. This transformational business model brings the required technical labor element to the equation – a necessary ingredient that OE dealers have naturally struggled with.
Jeff Boate, President, PERRY proTECH: Obviously the print market is not expanding at the same growth rate as in the past, it’s a mature market. We need to understand the transition and to provide more services to become our clients total outsourced technology provider. This is the key to long term relationships. This new thinking will focus on managed IT that includes print such as A3 and A4, selling deeper, lead nurturing and focusing on net new MIF.
Larry White, VP of Sales, Toshiba America Business Solutions: While the content management space is certainly evolving, the most important component – and one constant – for office channel dealers remains the same: provide customers with industry-leading products and services backed by superior customer support. Since the content management space is migrating beyond producing the highest number of prints per minute to offering hardware with enhanced data security functionality operating as ecologically-efficiently as possible. To better allow our customers to operate more sustainably, our research and development team responded by introducing the world’s first MFP with erasable toner – the e-STUDIO306LP/RD30 – or what we refer to as our eco MFP enabling our customers to reuse the same sheet of paper as many as five times. For a vast segment of our customers seeking to bolster data security, we introduced our Self-Encrypting Drive, which has attained validation meeting the stringent U.S. Federal Information Processing Standard 140-2. We also clearly understand that our customers’ content management needs go well beyond print. It is also about managing information digitally and on display. With this mind, we recently launched our Ellumina digital signage line to help our customers better articulate their unique brand differentiators to external audiences whether on a video wall within a retail store, mall kiosk or even on a scoreboard amid thousands of screaming fans.
Dave Sobel, Director of Partner Community, MAXfocus: The most successful solution providers are those that understand the economics of recurring revenue. More than any other factor, the best-in-class solution providers who have lead the industry in profitability and in growth are those that have embraced recurring revenue and built their business around delivering services via ongoing contracts. These solution providers identify that services are the most profitable way to achieve this goal, and in many cases this evolves into a managed services model. Managed services, by its very nature, requires solution providers and dealers to focus on process discipline, understanding of customer requirements, and insight into technology and business trends to anticipate future needs. As solution providers master these important skills, the top tier has added the ability to add new lines of business by embracing concepts of agile development, making themselves into perpetually valuable MSPs.
Andy Smalley, Director of Marketing, FlexPrint: We live in a B2B world with B2C expectations. National companies are increasingly becoming more sophisticated, technology driven, and have a strong set of expectations from FlexPrint. As with their business, the ultimate impression of our company is shaped by the actual experience we provide to the enterprise versus general B2B expectations. As growth takes place across geographic boundaries, executives are looking for a single service provider that can provide consistent, high touch-point service to their entire national footprint via a single SLA. Instead of diversifying to provide other managed technology services, FlexPrint has made the strategic decision to focus on what we do best – National Managed Print Services – and enhance the customer experience at the end user level across geographic boundaries and the entire enterprise. Providing an experience that exceeds those expectations is the essence of determining whether or not our customers will be satisfied. Thus, the key component and focus for FlexPrint has been cultivating employee engagement. Highly motivated employees lead to better customer experiences at every level, and ultimately improved business results. We’ve worked hard to develop a customer-centric core and empowering our employees to go beyond both B2B and B2C expectations.
IS: How important is it for providers to grasp ‘the bigger picture’ of where our industry is heading due to new technology and services, and to collaborate and partner?
Toni / Xerox: We are all linked together. It is vitally important that everyone in our industry understand where we are headed today. With continued declines in printed page volumes, there is tremendous pressure on traditional office equipment and aftermarket profit margins. Other profitable sources of revenue must be developed and expanded to improve the financial health of every participant. Without a “big picture” view, it is far too easy to focus on a single element, and be edged out by competitors that take a broader approach. Because much of the technology and many services require specialized knowledge and skills, dealers and solution providers must make the choice—develop in-house capabilities, partner with other organizations, or a combination of the two. For many dealers and solution providers the hybrid approach has worked successfully to maximize their resources and attract new customers. For example, we know 84% of decision makers prefer one source for IT and print needs. Dealers can support their decision makers’ needs by taking on IT support or by creating local relationships with IT providers. Dealers who do not offer an expanded portfolio of products, solutions and services give a tremendous edge to competitors that do.
Thomas / DocuWare: We believe that understanding this “bigger picture” is pivotal for surviving in this industry as the traditional business will experience volume and margin erosion. At the same time, given the fact that most office dealers have thousands of existing accounts with strong personal relationships; the whole industry has a unique chance to leverage the business opportunities around these newly evolving services and technologies. The best and most efficient way to take full advantage of these opportunities is certainly to work with vendors such as a Managed Services Provider or a software vendor who can provide expertise and resources.
Michael / Continuum: If dealers don’t grasp the “big picture” of where this industry is quickly headed with dwindling copy and print sales, they will begin to experience a slow at first – then rapid decline of their core customer base as managed IT services providers steal them in the night. As they say, “he who owns the data – wins!” Conversely, those who do get the “big picture” can be the company that is stealing their competitors’ customers with this broader, more strategically important offering. It is critical to be tuned into the tremendous opportunity in managed IT services. They must be willing to change their outdated business model, capture the tremendous opportunity and remain profitable for years to come. Collaborating with the right partners is essential. No dealership can make this transition alone and support their customers’ technology needs alone. There are partners like Continuum who are helping dealers make successful transitions – easier and more profitable quickly.
Jeff / PERRY proTECH: We have to move away from a “head in the sand” mentality and embrace relationships with some competitors. Coopetition (cooperative competition) makes us better together, brings more value to everyone in this totally connected world. In fact, we are doing a disservice to ourselves and to our clients to ignore the value of working together.
Larry / Toshiba: It is vital for us to develop leading technology and services to more effectively collaborate and partner with our end users. To continually improve our hardware and managed print service programs we rely heavily upon the day-to-day input our direct and independent dealers provide. As a result of the close partnerships we enjoy with many customers, our development team receives the insight necessary to engineer and create our industry-recognized eco MFP, Self-Encrypting Drive, Encompass MPS software as well as our recently unveiled Ellumina digital signage line. While we are thrilled to have created such advanced technology, our research and development team is constantly seeking to create new innovations to further improve our customers’ businesses.
Dave / MAXfocus: Projecting into the future, the most successful solution providers not only have embraced the ideas of recurring revenue and understood both operational excellence and customer requirements, but have also honed the ability to understand the market place. In addition to established knowledge of today’s technologies and best practices for effective operations, the most successful MSPs also have the ability to stay in touch with new releases, developing trends, and products that actually do what they say they will. Even more, they have to know which technologies their customers will bet their businesses on and hedge their bets accordingly. In areas where solution providers do not have the ability to deliver on these technologies, it is critical to partner and collaborate to drive success. Customers are looking to minimize the number of vendors they are required to engage with, and by seeking out collaborations proactively, solution providers differentiate themselves from their competition and deliver on customer needs.
Andy / FlexPrint: You should always grasp ‘the bigger picture’ of where our industry is heading to better understand competitive differentiators, but that doesn’t direct strategic decisions for FlexPrint. What’s more important to “better understand” is where our customers industry is headed due to new technology, and innovate ways to align document technology with those specific KPI’s. Each industry is different, and the alignment/value proposition differs across vertical markets. We’re not providing a service “out of the box”, but true document/workflow solutions that align with enterprise business objectives within our customers’ industry.
IS: People say “we’re not providing copiers anymore, were in the business of providing technology products and services to clients.” Is this true for most dealers & solution providers in order to make the transformation?
Toni / Xerox: Yes, absolutely. Most forward-thinking dealers have been offering technology products and services for years. A quick review of dealer websites reveals that hardware sales and service selling has taken a back seat to a total solution approach that includes copiers as a part of the solution, but not as the featured product category. However, many dealers are now faced with a decision; do they want to offer hardware and turn over the network installation and workflow software needs to someone else letting competitors in through the backdoor? Network management and workflow integrations are the more sticky aspects of the customer relationship and whoever owns those is in the driver seat for future hardware buying cycles.
Thomas / DocuWare: In our experience, about 15-20% of all office equipment dealers have made the complete journey to become solution and managed-services led organizations. For the remaining dealers we see a broad variety as to how far they have come in developing a services and solution portfolio. However, everyone sees the necessity to change and adapt; it is just a question of how fast they can move forward with this transition.
Michael / Continuum: Office equipment dealers continue with the challenges of balancing traditional copy and print sales that are at the core of their business today, with new managed IT services that are the growing current and near future. But yes, in order to have a sustainable future in this business, dealers need to provide “technology products and services” to clients, not just copiers. Customers are looking for full-service dealers to support all of the technologies that reside on the network. Dealers who partner with the right technology providers will be more operationally efficient, better prepared to scale and more profitable.
Jeff / PERRY ProTECH: We do need to transform, but everyone claims they are “selling solutions” - so what exactly does that mean anymore? There is still an intrinsic value on equipment when placed strategically in conjunction with our solutions; it brings more value to our clients. By providing close to the device applications, we teach our clients the value of the hardware and its importance to their business model. We do need to remember that we can’t service things that are not physically there. The key is to equip your sales team with the right tools to uncover the business need and to articulate the solution effectively.
Larry / Toshiba: Considering Toshiba was one of the first manufacturers to offer MPS more than a decade ago, we clearly understand the concept of offering our customers more than copiers. Though hardware is obviously the most important component of any print fleet, there are more elements involved than outfitting customers with a vast selection of printers and multifunction products. An example of this is the unveiling of our Encompass MPS software program in the early 2000s. As an innovator in this area, we have enabled our customers to print smarter, more securely, efficiently and ecologically. With the upcoming launch of Encompass X, we are have continued to develop and refine this offering to further enhance our customers’ work efficiency and sustainability efforts. Additionally, Toshiba recently launched e-BRIDGE CloudConnect. This revolutionary application improves the user experience by allowing for remote management of e-STUDIO products. Gathering valuable data from the devices, dealers are given an in depth understanding of performance via the Cloud.
Dave / MAXfocus: The delivery of services as the core to a provider’s success is vital. While it is certainly possible to run a successful business with product and equipment sales only, this is an ever increasingly difficult business with shrinking margins. Services are a faster growing, higher margin business, and clearly the leader for opportunity within the channel. I strongly believe that providers need to be transforming their business model to embrace services, and ideally recurring revenue services, to achieve best-in-class results and truly thrive.
Andy / FlexPrint: FlexPrint made that decision since our inception, and that decision has helped us thrive today. We’re not in the business of selling equipment and provide service as an afterthought – that is what commoditized the industry. We are a service-led organization that provides excellent customer service through engaged and enthusiastic employees, and help our customers make informed decisions when the need for asset acquisition arises. It is our opinion that business models should change in order to thrive. Technology and business behavior is changing drastically which warrants the change, but that doesn’t necessarily mean you should diversify and add non-core services to your portfolio – unless you can become an industry leader and provide true subject matter experts to the additional portfolio. Opportunities are coming our way because a traditional MSP couldn’t deliver superior results with an MPS program like FlexPrint. FlexPrint’s decision to stay true to our business model, and enhance the customer experience is paying dividends.
IS: What do you see percolating on the horizon in 2015 that offers true value & opportunity to office dealers, solution providers & MSPs?
Toni / Xerox: New technology and software for Managed Print and IT services will enable a broader range of dealers to expand profit opportunities with additional services that customers truly need. Dealers will be able to solidify relationships with personalized applications that improve user productivity. One example is Xerox’s Personalized Application Builder which provides dealers with a set of tools and training that lets them personalize solutions to meet their customers’ unique requirements. We also expect new relationships to form that dealers can leverage to provide services they do not offer today.
Thomas / DocuWare: The big opportunity, in our view, for the industry is the advancement in offering high-value services for a customer’s documents. These services include document security, compliance, document management and workflow automation. There is still a vast market opportunity for these types of services and customers are starving for affordable solutions offered by knowledgeable vendors. The office equipment industry is in an ideal position to provide these desired solutions on a mass-scale as long the necessary investment into training and expertise is made.
Michael / Continuum: With traditional hardware and copy sales flat or declining, office equipment dealers are well suited to capture revenue from the managed IT services market, expected to surpass $320 billion by 2020. We expect Continuum partners will continue to succeed with the guidance from our business model, as well as become true players in the next generation of technology – the cloud. Continuum partners who are outsourcing with the company’s U.S.-based Help Desk are truly taking advantage of a strategic partnership that allows the dealer to focus on driving sales and strengthening margins. Continuum will continue to focus its strategic resources in helping OE dealers make the successful transition to managed IT services in 2015 and beyond.
Jeff / PERRY proTech: The 3D discussion still leaves a lot of unknowns in a virtually immature market. Our focus will be the convergence of sales and service to maximize client satisfaction, to provide an easy to value managed technology model and to have our existing service team prepared to provide level one help desk to this new customer model.
Larry / TABS: Although it is now widespread, I believe MPS has yet to reach mass acceptance and is an area the channel should continue to pursue vigorously. As such, manufacturers and dealers still have ample opportunity to integrate custom MPS programs allowing customers to operate more efficiently, economically and sustainably. Without a doubt though, digital signage is a burgeoning product segment that is ripe for dealers and manufacturers to integrate. To become successful in selling digital signage, dealers and manufacturers should establish criteria for entering vendor partnerships, outline their service and support program and perhaps most important, decide whether or not to provide content.
Dave / MAXfocus: In 2015, I remain very bullish on the channel as a whole. In particular, I believe the area of managed security will be an area of significant opportunity. A number of industry sources all cite significant investment in security services; and MSPs are perfectly positioned to deliver these services. Layered, proactive security services that are delivered on an ongoing basis are the ideal managed service, beneficial to both customer and provider, and deliver on real value.
Andy / FlexPrint: Two things come to mind. First, it will be interesting to see how 3D printing progresses and determine if it’s just a consumer fad or if true applications can be made in the business environment. Second, it will also be interesting to see how OEM’s progress with their new business models of MPS. With the basic rules of supply and demand, and the general consensus that print volumes are dropping, one would think a shift in print volumes would occur - which should bode well for desktop devices and hinder the copier marketplace. Wall Street is kind of showing us something different.